When you fill up your car with a gasoline and ethanol blend most likely you are burning ethyl alcohol produced from U.S. corn. A few years from now, however, your commute may be powered by ethanol made from sugar cane cultivated in the Brazilian cerrado. An economic powerhouse dynamically bursting forth on to the world stage, Brazil is the Earth’s largest producer of sugar cane ethanol. President Luiz Inácio Lula da Silva has jumped on the ethanol bandwagon, repeatedly remarking that his country’s fortunes depend on a future in which "we plant and harvest fuel." In São Paulo, a sprawling city of 18 million, motorists can fill up their tanks with either gasoline or ethanol, known in Brazil as alcool. Most opt for ethanol, not surprising given that this biofuel costs half the price of gasoline.

Though Brazil’s exploration of ethanol production goes back to the 1920s, it wasn’t until the 1970s that the industry started to gain any traction. Buffeted by the oil price shock of 1973, the country’s military dictators grew concerned about Brazil’s reliance on foreign imports of fossil fuels. Their solution: Pour government subsidies into the sugar industry and mandate ethanol distribution at the pumps. Today one can buy so-called "flex-fuel" cars (known as carros flex in Portuguese) that run on gasoline, ethanol, or any combination of both. Because ethanol is cheap, the public has bought up the cars, and currently a full 90 percent of new vehicles sold can run on alcool.

There’s no escaping it: Brazil has become deeply committed to ethanol, and economists expect that "alcohol fever" could attract some $100 billion in investment. The industry hopes that this will lead to the construction of one hundred new distilleries by 2012, by which time domestic ethanol production will have doubled.

On the surface of it, Brazil’s ethanol boom has proven to be both economically and environmentally desirable. The sugar cane-based fuel is 30 percent less expensive to produce than the corn-based variety coming from Iowa. Sugar ethanol is also efficient: One acre of sugar cane can yield more than twice as much ethanol as an acre of corn. Compared to corn, sugar cane also looks pretty environmentally friendly: Brazilian farmers use less fossil fuel to convert sugar cane to alcohol than Iowa’s farmers do to produce corn ethanol. Even better, plant waste from sugar cane can be used to produce heat and electricity right in the distillery itself.

As a result of its turn toward ethanol, Brazil avoided emitting 600 million tons of carbon between 1974 and 2004. So what’s with environmentalists who complain about ethanol — won’t they ever be satisfied?

While sugar cane ethanol is certainly less ecologically destructive than some other biofuels, the industry’s boosters have overlooked one key fact: You’ve got to plant sugar cane somewhere. One couldn’t pick a worse place to harvest cane than Brazil’s Atlantic rainforest. There, sugar cane crops have led to deforestation and, paradoxically, more carbon emissions.

It’s difficult to imagine that a serene and pastoral landscape lies just beyond São Paulo. Take a bus through the city and the miles and miles of grey industrial factories stretch on forever. But nearby is the Atlantic rainforest, also known as the Mata Atlântica. When the first Portuguese explorers stepped ashore in 1500 A.D., the forest may have covered more than 500,000 square miles, or approximately one-fifth the size of the current Amazon jungle lying 500 miles to the northwest. To put it in perspective, that’s an area about twice the size of the state of Texas. Located in the Brazilian south and southeast, the Atlantic rainforest ranged all the way up to the Northeast in a long coastal strip. In some areas the forest even extended a full 300 miles inland or more and encompassed a broad spectrum of habitats, including coastal mangrove thickets and mountain massifs 3,000 feet high, covered in broad-leaved evergreens and conifers.

In a bad omen, one of the first things the Portuguese explorers did was to chop down a tree. They then built a cross out of it and celebrated Mass, claiming the land and rainforest for God and king. In short order the Portuguese went to work, cutting down trees and releasing the carbon stored in the rainforest. In 1525, the Portuguese began to grow sugar cane and introduced the crop to the Atlantic rainforest. Then, the colonists shipped six million African slaves to Brazil to do the cutting.

Over the next five hundred years the Atlantic rainforest bore the brunt of Brazil’s economic development. The country’s eastern seaboard has long been the main population and industry center — 70 percent of Brazil’s people live there and the area includes huge cities like São Paulo and Rio de Janeiro. Over time, Brazil lost about 93 percent of the Atlantic rainforest and today only tiny remnants of the ecosystem remain.

Today, Rio and São Paulo are congested mega-cities, yet try as it might Brazil cannot escape its colonial sugar legacy. Just outside the urban center ethanol producers have set up shop in the Atlantic rainforest, and last year the government fined two dozen of these firms for illegally clearing the land. After the authorities clamped down the companies were obliged to restore 143,000 acres of rainforest.

Whatever the environmental advantages of ethanol, this thriving business now threatens our Earth’s climate balance by its destruction of the Atlantic rainforest. It is ironic that a supposedly green industry could wind up imperiling such a valuable habitat. Though it’s a fraction of the size of the Amazon, the Atlantic rainforest contains a similar range of biological diversity. Consider: The area has about 2,200 species of birds, mammals, reptiles, and amphibians. There are almost 200 bird species and 21 species of primates in the Atlantic rainforest that are not found anywhere else in the world. Furthermore, there are approximately 20,000 species of plants, representing 8 percent of the world’s total, and new species of flora and fauna continue to be discovered. Among biological hotspots — environmentally threatened regions with a high number of species encountered nowhere else in the world — the Atlantic rainforest ranks as one of the top five.

The environmental destruction unleashed by ethanol in the Atlantic rainforest is troubling enough, but what if sugar cane were to lead to more deforestation in other sensitive areas? Today the Brazilian sugar cane industry is centered in the state of São Paulo — drive just an hour out of the city and you can see sugar cane fields stretching for hundreds of miles. Palmares Paulista is a rural agricultural town 230 miles from São Paulo. Behind rusty gates lies a squalid red-brick tenement building. Inside, weary migrant workers breathe the stale air and try to prepare themselves as best they can for the long day ahead. The cortadores de cana, or sugar cane workers, are crammed into tiny cubicles filled with rickety bunk beds and unpacked bags. They hail from the poverty-stricken, drought-plagued northeast and earn paltry wages.

Despite the hellish conditions for the workers, ethanol has been able to sell itself to the public on its ability to reduce carbon emissions. Again, however, there are other greenhouse gases to consider besides carbon dioxide. The Brazilian ethanol industry uses more than 240,000 tons of nitrogen fertilizer per year at a cost of about $150 million. At a public senate hearing in Brasilia called to discuss climate change, experts expressed concern that nitrogen fertilizers used in conjunction with sugar cane production yielded nitrous oxide. What’s more, when you cut cane by hand you’ve got to set controlled fires in the fields to smoke out razorsharp leaves, nasty snakes, and tarantulas. In the middle of the night, plantations look like a war zone as burning fields light up the sky and the wind blows billowing smoke clouds far and wide. Not only do the burnings pollute the air with soot, causing a number of illnesses, but they also release methane, a potent greenhouse gas, and nitrous oxide.

Public officials declare that ethanol will not lead to deforestation in the Amazon or exacerbate climate change. They say that the particular soils and rainy weather characteristic of the rainforest are not suitable for the growth of sugar cane. Agriculture minister Reinhold Stephanes has been quoted as saying that "Cane does not exist in Amazonia." In a withering blow to Stephanes’s credibility, however, authorities recently raided a sugar cane plantation in the state of Pará where 1,000 workers were laboring under appalling debt slavery conditions. In all, environmentalists claim, hundreds of thousands of acres of sugar cane have been planted in the Amazon.

Even if there are only a few cane plantations operating in the Amazon, ethanol may exert an indirect impact on the rainforest through a phenomenon known as "agricultural displacement." Though the state of São Paulo is located far from the Amazon rainforest, the sugar cane there can drive other crops toward the agricultural frontier. In the state of São Paulo, sugar cane has been planted on former pastureland and this has pushed cattle into Mato Grosso. Hundreds of thousands of cattle are moving into the Amazon every year as a result of displacement by ethanol in the state of São Paulo alone, say environmentalists. This migration is becoming all the more likely since one can purchase 800 hectares of land in the Amazon for the price of just one hectare in São Paulo. Additionally, some soy plantations in the center of the country have been turned over to ethanol production, prompting concern among environmentalists that this will lead soy producers to move into the Amazon. And local observers say that sugar cane plantations are already pushing soy farmers and ranchers into the rainforest.

There’s been a fierce back and forth between European and Brazilian officials on the question of biofuels. The top scientist at the U.K. Department for the Environment recently warned that mandating more biofuel use as proposed by the European Union would be "insane," as this would lead to an increase in greenhouse gases. Sweden, the only European country that already imports Brazilian ethanol for its public transportation system, used to think biofuels were heaven but now believes they are hell. After allegations that some Brazilian sugar cutters were paid paltry wages, were underage, and even perished at a young age from exhaustion, Swedish motorists threatened to cease their use of this supposedly green fuel. To make matters worse for the burgeoning Brazilian ethanol industry, the United Nations has added its voice to the chorus of critics. Achim Steiner, head of the body’s environment program, declared that growing international demand for ethanol would threaten the Amazon if safeguards were not put in place.

Shooting back at critics across the Atlantic, President Lula said that biofuels were actually an effective weapon in the struggle against global warming. Lula chided Europe further, claiming that the developed world was simply jealous of Brazil’s emergence as a major agricultural powerhouse. "Just when Brazil appears on the world stage not as a bit part actor but as the lead in a play about agricultural production … people start to get uncomfortable, very uncomfortable." Furthermore, the Brazilian politician remarked, European competitors were using the environment as a red herring to stall Brazil’s biofuel industry. "We have adversaries that will make up any kind of slander against the quality of ethanol," Lula declared. But as Brazil attempts to roll into an ethanol-fueled future, the attacks Lula denounces will become increasingly valid.